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March 1, 2011

Henry Fined $500,000 For Revenue Sharing Comments

In early December 2009, Red Sox principal owner John Henry wrote a lengthy email about baseball's revenue sharing system. Henry revealed this afternoon that he was fined $500,000 by MLB for those comments.

The large markets aren't allowed to give their opinions. I made statements which turned out to be true, or at least there were various documents that were leaked after that. But anyway, the large clubs are not allowed to talk about it.

Change is needed and that is reflected by the fact that over a billion dollars have been paid to seven chronically uncompetitive teams, five of whom have had baseball's highest operating profits. Who, except these teams, can think this is a good idea? ...

While the Red Sox are in the 16th largest media market we've found a way to be very competitive even though we are funding other teams. ... [Baseball needs] an effective competitive balance tax that directly addresses disparity once and for all ...

It's a very simple approach in which payroll tax dollars replace revenue sharing dollars and go directly to the clubs that need revenues in order to meet minimum payrolls that should be imposed on each club receiving revenue. Further, players would have to be protected with a guaranteed minimum percentage of overall revenues. This would be a very simple and effective method in reducing top payrolls and increasing bottom payrolls with no tax on revenues. ...

Baseball has determined that the best way to deal with the Yankees is to take as much of their revenue as possible. I see that in direct opposition to the ideals this country was built on. Baseball is a business and should be treated as such. Baseball is also a sport that needs competitive balance in order to prosper. Taxing their revenues and other "large markets" in the way it is presently done, is simply confiscation on an order of magnitude never seen in any industry in America. ...

It's amazing because owners, some of the most ardent capitalists in the country – who have all made their fortunes through capitalism, have imposed a tax system on baseball they would never sit still for in any of their industries.

The Globe's report concludes with this gem:

MLB spokesman Pat Courtney would not comment on whether Henry could face additional punishment for revealing the amount of his fine.

1. Fining Henry -- or any club executive -- any amount of money for offering an opinion is asinine. Bud Selig is a big boy, and he ought to be able to handle some open discussion and/or dissent about the sport.

2. But as long as MLB is determined to have any owner who talks out of turn in class go sit in the corner, how much will it run you if you utter a statement like this:

We've got to do a little something about that and I know Bud wants to correct it in some way. There's a way. Obviously we're very much allied with the Red Sox, Mets, Dodgers and Cubs in that area. At some point if you don't want to worry about teams in minor markets, don't put teams in minor markets or don't leave teams in minor markets. Socialism, communism - whatever you want to call it - is never the answer.

I'm amazed to hear the owner fall into the trap that the Red Sox are a "large market team." They aren't. In all three metrics, the Sox are right in the middle of the pack, ranking below the top twelve cities in the country in population (Boston, Boston Metro, and northern/middle New England).

The Sox are one of the greatest marketing successes in American history, in that their revenues per capita for their natural fan base FAR outpaces any other sports team. Calling them a "large market team" does this a huge disservice.

Matthias is good to point that out, but those expressions have little to do with reality. "Large market team" and "small market team" are used for convenience purposes only - and their meanings shift as it suits Baseball's purposes.

We create our reality in part through the language we use. He's giving away leverage when he cooperates with those who want to put the Sox in the same economic category as the Yankees, Mets, Dodgers, Phillies, Astros, Cubs, WSox, etc.

He could make a suggestion that revenue sharing be done based on the populations of the natural markets, for example. That would reward excellence while leveling the playing field. If a team in a REAL large market isn't taking advantage of it, they get punished. Teams in medium sized markets that do well get rewarded. But that kind of creative alternative is lost when the term "large market" is defined by those who are jealous of the Sox success, rather than on objective data.

Allan wrote: Henry says "the Red Sox are in the 16th largest media market". Those things are tricky to define, though.

I have to disagree, Allan. When people talk about "media markets", like Henry did in his statement, they're usually following this definition. That's the standard that all U.S. broadcast media use to determine the "size" of their market. So, when Henry states "the Red Sox are in the 16th largest media market", he's basing it on a standard measurement which is used widely in my country. Usually, people reference television statistics (Boston is 7th on this list for example), but it sounds like Henry is including other media (radio, newspapers, etc) on his list based on the ranking he stated. Personally, I'd like to see the list Henry used for a reference.

He's giving away leverage when he cooperates with those who want to put the Sox in the same economic category as the Yankees, Mets, Dodgers, Phillies, Astros, Cubs, WSox, etc.

I would say the Sox do belong with most of those teams, but the Yankees have to be taken out and made their own category. When you're way down at 23rd or 27th and looking up, New York and Boston seem bunched together at the top, but they are not. (I am not saying you are saying this.)

P-Wolf: It seems like many sports media and fans use attendance at games (or team payroll) as a barometer far more often than they refer to these market definitions.

Here is a list of teams ranked by the population of their metropolitan areas. Top markets (over 5 million), in order:

It seems like many sports media and fans use attendance at games (or team payroll) as a barometer far more often than they refer to these market definitions.

Both of these measurements seem kind of silly to me because they're completely based on how well the team is doing at the time or how much money they're spending. That would make the Orioles a "large market team" in the late 90s (by either standard) and a "small market team" right now (ditto for both standards here), for example.

Does anyone call the Nationals a large market team?

I guess what it comes down to is perception, because I *do* consider the Nats a "large market team" because I live in the DC Metro Area and I know how many people live here. If the Nats are competitive (and I think they will be, to a point, this year), then they'll pack their stadium to the rafters. Go look at the attendance figures for when Strasburg pitched last year. DC has been craving a baseball team for a long time. They're still not at their full potential yet. They're close, though.

The type of market has nothing to do with city demographics. It's all to do with fanbase and revenue from that fanbase.

The Indians were a large market team when they were successful and had increased revenue from merchandising and ticket sales. Once their popularity dropped, the loss of income followed, making them a small market team.

I've always thought it odd that professional (and collegiate) sports organizations fine players, coaches, managers, etc., for making statements, fact or not, that don't align with the league's position.

Free speech applies more to allowing people to speak freely about their government; I don't think it applies unilaterally to private organizations (correct if I'm wrong). Just the same, it seems foolish to punish Henry for speaking his mind.

The type of market has nothing to do with city demographics. It's all to do with fanbase and revenue from that fanbase.

It also has to do with how much ownership is willing to invest in the payroll. I'm more willing as a fan to spend more on a team stocked with big-name stars than one with Triple-A prospects and low-rent journeymen.

That would make the Orioles a "large market team" in the late 90s (by either standard) and a "small market team" right now (ditto for both standards here), for example.

And that's exactly what MLB does, depending on what they're trying to prove. The terms are always shifting.

Also, I'd like to note that this

We create our reality in part through the language we use.

is a point of view, but not a fact. How reality is constituted is a subject of much debate. Language creates perceptions and perpetuates points of view, but I don't believe it actually creates reality.

I know this is a complex subject and not necessarily what we want to discuss here. I just have a problem letting (IMO) hyperbolic statements like that stand unchallenged.

Free speech applies more to allowing people to speak freely about their government; I don't think it applies unilaterally to private organizations (correct if I'm wrong).

I wasn't referring to a Constitutional or legal definition, not First Amendment rights, but simply to free speech, lower case letters - John Henry's right, and your right, and my right, to voice an opinion.

Why should Major League Baseball need to approve any public statement by the owner of a team? Why should a team owner by censured or fined for disagreeing with how the organization is being run?

Regarding "unilaterally", if Bud Selig is allowed to voice his opinions, and John Henry or any other owner is not, then free speech is indeed unilateral here, not universal.

Baseball and apple pie aren't in the US constitution, either. The free exchange of ideas is just generally considered a good thing.

The distinction I'm making here is that the Red Sox CREATED their success from a market that is at best the 10th largest in the country to draw fans, media coverage, advertising, and retails sales from. It is roughly the same size as Detroit and Phoenix, for example.

Other baseball clubs have far more advantages than the Sox do in this regard and have done less with it.

The issue at hand is how much money should be transferred from one team to another, due to one team being more successful financially than another? When we allow the "large market" term to be applied to the Sox as justification for them having to pay more than others, but not to the other teams of similar size, we cut into its competitiveness. The more money they have to give to other clubs is less money they have to invest in winning (farm system, salaries for staff and players, etc.).

and to laura k, is there something about your view of how reality is created that is not a "point of view?"